Opinion of Advocate General

Mr President,

Members of the Court,

1. In this case, Italy is seeking the partial annulment of Commission Decision 90/644/EEC of 30 November 1990 on the clearance of the accounts presented by the Member States in respect of the expenditure for 1988 of the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (EAGGF).

Preliminary general observations

2. The common agricultural policy is characterized by its very specific management structure, in which both the Member States and the Commission have important roles to play. As far as the financial side is concerned, the basic rules are laid down in Regulation (EEC) No 729/70 of 21 April 1970. By virtue of Articles 1, 2 and 3 of that regulation, aid under the common organization of the agricultural markets is to be financed by the EAGGF (Guarantee Section), that is so say, out of the Community budget. However, under Article 4 it is the authorities and bodies of the Member States which are to make the payments. Undoubtedly, this system has numerous advantages. But it can give rise to difficulties between the Member States. The payments made by a Member State directly benefit its own economic operators, whilst the financial burden is partly borne by the other Member States through the Community budget.

3. As far as the first point is concerned, that is to say, strict compliance with the Community provisions, it is for the Member States to ensure that the payments which they make actually comply with the Community provisions. That supervision relates to the relationship between the recipients of aid and the Member States as parties executing the common agricultural policy.

4. As far as the second point is concerned, that is to say, the charging to the Community budget only of expenditure which has been made in accordance with the Community provisions, Regulation No 729/70 makes this dependent upon the Commission's approval. The resultant clearance of EAGGF accounts relates to the relationship between the Member States, as executing parties, and the Community, as the authority financing the common agricultural policy.

5. Consequently, both in the relationship between recipients of aid and the Member States and in the relationship between the Member States and the Commission, it is of essential importance that expenditure should comply with the Community provisions. Moreover, Articles 2 and 3 of Regulation No 729/70 expressly provide that only expenditure undertaken according to Community rules ... may be charged to the Community budget. This rule is both objective and strict. It is couched in the following terms in the judgment in Case 326/85 Netherlands v Commission:

6. A question of major importance for the practical operation of the system for the clearance of EAGGF accounts is that of the burden of proof having to be discharged by the Commission where it refuses to charge expenditure to the EAGGF on the ground that Community law has been infringed and how it may obtain the requisite evidence.

7. More specifically as regards the burden of proof which the Commission has to discharge where it refuses to charge expenditure on the ground that Community law has been infringed, the judgment in Case C-281/89 Italy v Commission states as follows:

8. However, that allocation of the burden of proof cannot be regarded as being a rigid rule, but must, where necessary, be adjusted to suit the actual circumstances of the case. The starting point is that the Member States, as the parties executing the common agricultural policy, bear the primary management responsibility and also have the best access to the factual evidence. The judgment in Case C-281/89 Italy v Commission affords an example. The applicable Community law placed the national intervention agencies under a duty to carry out a particular operation at minimum expense. The Commission took the view that the costs incurred by the Member State concerned were not the lowest possible and effected a correction on the occasion of the clearance of the EAGGF accounts. The Member State challenged this by arguing that the Commission had not adduced sufficient proof of the infringement of Community law. In the words of Advocate General Mischo, strict application of the aforementioned rule allocating the burden of proof would

9. As far as the finding that Community law has been infringed is concerned, the Commission has only a limited duty to state reasons in its final decision refusing financing:

First point in dispute: LIT 83977318963 in respect of the additional levy in the milk and milk products sector

10. This point in dispute is concerned with the calculation of the additional levy in the milk and milk products sector. That additional levy, which supplements the wellknown co-responsibility levy, has to be calculated annually on the basis of the difference between the quantity of milk produced and a given reference quantity. In order to determine the quantity of milk produced in 1988, the year in question, the Commission added to the figure for milk deliveries supplied by the Italian statistical institute ISTAT to EUROSTAT a figure to cover cheese deliveries. Italy contests the addition of that figure, which increased the amount of the additional levy by LIT 83977318963.

11. As far as the first of those pleas is concerned, the Commission defends itself by stating that in the previous year, 1987, and in the subsequent year, 1989, it also added a figure for cheese deliveries to the ISTAT figure for milk deliveries. Yet Italy raised no objection in regard to those years. Moreover, the figure for cheese deliveries added by the Commission was obtained from figures of the Italian Ministry for Agriculture and Forestry which were used in all three years. The Commission argues that it is clear from all this that Italy acknowledged the correctness of the Commission's calculation. For its part, Italy maintains that it never accepted the Commission's point of view. The fact that it did not contest the decisions of 1987 and 1989 (which is not definitive as regards 1989) is attributable to an assessment of expediency on its part, from which no conclusion may be drawn. The Commission should accept the ISTAT figures without any addition or else prove that they are incorrect.

12. I would consider those arguments in the light of the general rules on the clearance of EAGGF accounts, more specifically the rules on the burden of proof. As has already been stated (section 7), as a rule it is first for the Commission to prove that Community law has been infringed, after which it is for the Member State to prove the contrary by means of conclusive evidence or, in an appropriate case, to show that the Commission has committed an error as to the financial consequences to be drawn from the infringement. The application of that rule is simple as regards 1987, that is to say, the preceding year, when the Commission added the contested amount for the first time. In that year, Italy omitted to impose any additional levy. Consequently, the infringement of Community law was unquestionably established. In order to correct that omission, the Commission itself had to estimate milk production. In order to do this, it added to the ISTAT figure an amount to cover deliveries not included therein which it derived from data from the Italian Ministry. Italy has not challenged that decision or that approach.

13. I can be briefer on the second plea, which alleges that the Commission incorrectly added disparate figures. As the Commission stated in response to this plea, the figures provided by ISTAT, like all statistics, are only approximate data. I cannot see why such data may, even must, not be supplemented by concrete figures provided by the competent Italian authorities.

14. The third plea, alleging that the decision is insufficiently reasoned, also fails to persuade me, having regard to the aforementioned rules on the obligation of the Commission to state reasons (section 9).

15. What is in dispute is part of a total of LIT 70 billion in premiums paid out by Italy to producers of sheepmeat and goatmeat which the Commission refused to charge to the EAGGF. However, Italy does not contest the refusal to charge approximately LIT 3 billion on account of late payment. Of the remaining LIT 67 billion, which the Commission refused to charge to the EAGGF on the grounds that there were no or insufficient controls, LIT 14 billion has been only provisionally refused to the charged, subject to Italy's providing further evidence. The instant case is concerned solely with the LIT 53438771788 which the Commission has definitively refused to charge to the Fund.

16. I shall start with the first of the two pleas. In section 4.6.7.5 of the summary report, the Commission sets out exhaustively on what basis it deemed it necessary to carry out a financial correction on the ground that there were no or insufficient controls. The Commission carried out an audit of the mechanisms and procedures for the grant of the premiums in question in Italy. In the course of that audit, it became clear that the documentary evidence used by the Italian authorities was insufficient and, in some cases, completely lacking. It further appeared impossible to verify whether, as the applicable Community rules require, the premiums had been granted only in respect of animals which had been kept on the farm for at least two months. Italian officials informed the Commission and the Commission's on-thespot inspections showed that the animals were often slaughtered earlier, the producers kept no documentary evidence (in order to evade tax) and the inspectors often forwent carrying out any controls. Lastly, discrepancies in the figures raised the suspicion that the figures relating to the number of animals had been artificially inflated. Moreover, the Commission had not only investigated procedures in the various regions, but had also directly checked a number of files selected at random. Those checks brought some extremely remarkable information to light. For instance, an on-thespot inspection of farms in Sicily showed that the number of animals present came to only 1.5% of the number of animals for which premiums had been granted!

17. The argument that the Commission's findings are too uncertain to be associated with far-reaching financial consequences is not convincing. The Commission's findings as they are set out in the summary report are amply sufficient to form the basis for refusing to grant financing. The Commission manifestly set to work methodically and succeeded in gathering a variety of evidence.

18. Italy also argues — albeit without much conviction — that the shortcomings found cannot be imputed to it, given that it did its best within the limits of the possibilities afforded by existing legal means, regard being had to the objective social and economic situation and the characteristics of sheep and goat farming in Italy. That argument is not convincing either. If the mechanism for the clearance of EAGGF accounts allows of such arguments at all — which is doubtful in view of its objective, strict nature (see section 5 above) —, they have an unconvincing ring in this case. It appears from the Italian authorities' letter of 22 September 1990, which was produced to the Court by the Commission, that the factors allegedly constituting force majeure include such matters as tax and accounting rules, on which the Italian authorities themselves have an influence, and that it is manifestly possible to improve the control mechanisms.

19. I would now turn to the second plea relating to the allegedly unjustifiable extrapolation. The Commission carried out checks in seven regions representing on aggregate 77% of the expenditure declared by Italy. In each of those regions, the checks related to the most important province or provinces. In each case, the results of the checks were generalized for the whole of the region. In this way, the Commission arrived at the figure of LIT 53438771788 for expenditure which it definitely refused to charge to the EAGGF.

20. This point in dispute is concerned with two financial corrections made by the Commission. The first (section 4.9.2.1 of the summary report) followed an inspection carried out of tobacco in intervention storage in the course of which the Commission found that some of the tobacco did not satisfy the minimum quality characteristics prescribed by the Community rules. The second correction (section 4.9.2.3 of the summary report) followed another inspection carried out on a particular lot during which the Commission found that some of the tobacco was of a lower quality than had been declared and that therefore too high a price had been paid.

21. I shall begin with the first plea. In Italy's view, the Court should annul the Commission's decision because it was based on the taking and analysis of product samples by Commission officials. Italy refers in this connection to the judgment in Case C-366/88 France v Commission.

22. The way in which Italy is now relying on that dictum means that serious consideration should be given to the significance of the judgment in Case C-366/88 France v Commission. The Court has not referred to it in subsequent judgments. In another case, a Member State relied on it as Italy is now doing. However, the Court did not go into that argument, since it held that the application was inadmissible on procedural grounds. Advocate General Gulmann did pay some attention to the judgment in Case C-366/88, which he described as in my view somewhat surprising in this respect. The judgment in Case C-366/88 France v Commission cannot be ignored in this case and, in my view, it must be concluded that limited importance should be attached to that judgment, or at least to paragraph 22 of it. If it were given a broad interpretation, it would be at odds with the many decided cases relating to EAGGF matters and also, to my mind, with the wording of Regulation No 729/70. If the judgment were given a wide significance, it would also seriously undermine the efficient management of the common agricultural policy. I shall explain, if you would allow me, each of those points.

23. The Court very regularly gives judgments on actions brought by Member States against the clearance of EAGGF accounts by the Commission. Generally, the dispute relates to a correction made by the Commission following some check which it has carried out. Often that check includes the taking and analysis of samples by Commission officials. The Court has never seen any snags in this. This is true not only of the period prior to the judgment in Case C-366/88 France v Commission but also of the subsequent period. Admittedly, in most of the cases the question of the Commission's competence to take and analyse samples was not raised directly, since it was not contested by the Member State concerned. Yet a number of judgments contain wording which is hard to square with the dictum in Case C-366/88 France v Commission. This is true in particular of the judgment in Case 214/86 Greece v Commission, in which it is stated incidentally (in paragraphs 17 and 18) that the Commission is entitled to use the power of supervision conferred on it by Article 9 of Regulation No 729/70 at any time and in particular when it receives information leading it to doubt the effectiveness of the national verifications. In that case, following complaints about the quality of durum wheat, the Commission asked the Greek intervention agency for samples and had them analysed itself by a laboratory in another Member State.

24. It also appears from careful scrutiny of Regulation No 729/70 that the judgment in Case C-366/88 France v Commission may not constitute a precedent as far as the point under consideration is concerned. The Court's supervisory competence as regards the clearance of EAGGF accounts is set forth in Article 9 of the regulation, of which the first subparagraph of paragraph (1) reads as follows:

25. In the instant case, the Commission argues therefore that the judgment in Case C-366/88 France v Commission is confined to the relationship with recipients of aid and does not extend to the relationship between the Commission and the Member States. The Commission rightly draws attention to this distinction. As I have already mentioned (in section 3 et seq.), the Commission and the Member States have very different tasks. As the party executing the common agricultural policy, the Member State is as good as exclusively responsible for the relationship with the recipients of aid. In the light of the principle of administrative cooperation, as laid down by Article 5 of the EEC Treaty, it is naturally conceivable that the Member State might seek the Commission's assistance in this connection. Yet in this area the Commission plays at most a secondary role, in the background. The situation is very different as regards the relationship between the Member States and the Commission in the context of the clearance of EAGGF accounts. In this case, the Commission plays a central role as the guardian of the Community's interests (and, indirectly, of the interests of the other Member States), in the course of which it has to examine whether the expenditure incurred by the Member States was consistent with the provisions of Community law. Such second-line supervision, that is to say, supervision of the Member States, presupposes in the first place that there will be administrative inspections, but may not be confined thereto. Second-line supervision by the Commission must also be able to consist of analyses carried out by the Commission itself in order to check the analyses performed by the Member States in their relations with undertakings in receipt of aid.

26. To my mind, it appears both from the other case-law of the Court on the EAGGF and from the wording of Article 9 of Regulation No 729/70 that the interpretation given in the judgment in Case C-366/88 France v Commission relates solely to the Commission's power to lay down general rules concerning direct sampling of products at the premises of undertakings (paragraph 14 of the judgment), in other words to involve itself in the relationship with undertakings in receipt of aid, namely by adopting general rules. The judgment holds in this regard that Regulation No 729/70 docs not provide for a power

27. I shall now turn to the second plea relating to the method used by the Commission in carrying out its checks and the statement of reasons for its decision. In this connection, I shall draw a distinction as between the two financial corrections contested by Italy.

28. The first financial correction, in the amount of LIT 711001829, was made following an inspection carried out between 7 and 14 February 1988 (see summary report, section 4.9.2.1). Italy has made three complaints about that inspection: the samples taken were not representative (60 packages out of 50459); the Commission made no allowance for the loss of quality of the tobacco as a result of the long time it spent in storage, and the samples were not carefully packed and transported. Those complaints were made against the Commission in the course of the procedure for the clearance of the EAGGF accounts, but were allegedly not taken sufficiently into account.

29. With its rejoinder the Commission lodged the requisite supporting documents; it appears from these that it examined these points in the course of an exchange of letters with the Italian authorities, in which it out across its point of view, and that, in view of the continuing lack of agreement, it asked the Italian authorities to a meeting on 9 January 1991. The Commission observes — and this emerges clearly from the summary report, too — that it did in fact take account of the complaints relating to the natural ageing of the tobacco and the packaging and transportation of the samples. Italy has not submitted any more specific arguments which would enable issue further to be taken with the Commission's conduct in this regard. As regards the representative nature of the samples, the Commission described the method which it used, both in the summary report and in its rejoinder. Italy has not raised any other arguments, except for simply pointing to the number of samples, namely 60 packages out of 50459. In my view, nothing can be inferred from that figure per se. The quality of a statistical finding depends on numerous factors and small samples taken at random may, depending on the circumstances, be sufficiently representative. Apart from the number of samples, Italy has not put forward any argument suggesting that the method used by the Commission was not reasonable or was not sufficiently reasoned vis-à-vis the applicant.

30. The second financial correction, in the amount of LIT 1554528324, was effected following an inspection carried out between 15 and 19 January 1990 (see section 4.9.2.3 of the summary report). Italy puts forward various arguments against that correction. The inspection was carried out by the same expert and using the same method as the inspection which was carried out between 7 and 14 February 1988, and had the same defects. As the Commission has observed and as appears also from the summary report, that argument is factually incorrect. The inspection carried out between 15 and 19 January 1990 consisted not of taking then analysing samples, but of a physical (visual) on-thespot inspection of the tobacco in store. In any event, Italy has not put forward any other factor such as to contest the soundness of the method followed by the Commission.

31. This point in dispute can also be broken down into two. The first relates to the 1988 financial year. As far as that year was concerned, the Commission made a financial correction of LIT 34172079373 following an inquiry showing that almost all the olive oil stored during that year was of quality inferior to that which had been declared when it was taken into intervention. The second point at issue is concerned with another inquiry, referred to by the two parties as the ASSITOL inquiry, relating to the accounts for 1985, 1986 and 1987, which showed that some of the olive oil was of inferior quality. This is the reason for which the Commission made an overall financial correction of LIT 26636657844.

32. As far as the first point is concerned, there is in fact little in dispute. It appears from the originating application that Italymade a claim in this regard merely on a precautionary basis. Italy has never contested the 1988 inquiry; on the contrary, it expressly accepted its financial consequences. However, a problem emerged when Italy, basing itself on the results of the inquiry, sought reimbursement from private persons who had unduly been paid the relevant aid. Those private persons contested the legality of the Commission inquiry before a national court, which sought a preliminary ruling from the Court of Justice. At the time when the present proceedings opened, the Court had not yet given its preliminary ruling. In the meantime, it has done so and confirmed that the Commission's inquiry was lawful. Consequently, this claim, as it is formulated in the originating application, is no longer of any purpose.

33. I shall now turn to the second point, which is concerned with the correction made following the so-called ASSITOL inquiry. Italy has raised two pleas in this regard. The first plea is based on the fact that the Commission itself conducted the inquiry, whereas, on the basis of the judgment in Case C-366/88 France v Commission, it had no power to do so. That plea is identical to that which I have already considered in connection with intervention in favour of tobacco (section 21) and must be rejected for the same reasons. The second plea relates to the Commission's conduct and the grounds of its decision to effect a financial correction. Italy's arguments can be broken down into two points.

34. Italy maintains that the Commission made the financial corrections at issue on the basis of information provided by ASSITOL, the association of the Italian oils industry. It argues that such information from a private party which might have an interest cannot be used by the Commission as evidence to rebut and avoid the results of investigations carried out by the Italian authorities.

35. Next, Italy argues that the results of the Commission's inquiry — that is to say, that a large part of the olive oil was of inferior quality to that which had been declared — are refuted by the fact that the oil in question invariably achieved a price commensurate with its declared quality when it was sold from intervention store and that when such oil was exported, the customs did not find that the olive oil was of inferior quality. Italy claims that it informed the Commission of this but never received a satisfactory answer. Accordingly, it claims that the Commission's decision is insufficiently reasoned.

Fifth point in dispute: LIT 38034266760 in respect of aid the processing of soya beans

36. The penultimate point in dispute relates to the aid which the Community grants for the production of soya beans. The aid was introduced in order to step up the production of soya and protect it against competition from soya beans imported free of duty from third countries (which is an extremely topical problem). An essential aspect of the system is that the aid may be granted only for soya beans which are produced and processed in the Community. In view of this, Article 6(1) of Regulation (EEC) No 2194/85 provides as follows:

37. In section 5.3 of the summary report, the Commission describes how it decided, on the basis of a inquiry conducted in two phases, to effect a financial correction of LIT 38034266760 in respect of the aid granted by Italy in 1988. In the first phase, it carried out on-thespot inspections at almost 400 farms. In the second phase, it examined the control procedures of the various public agencies involved and the operation of a processing undertaking. The Commission's inquiry sought to establish in particular whether sufficient checks were carried out in Italy on the Community origin of soya beans in respect of which aid was granted. The Commission reached, inter alia, the following conclusions with regard to this point (sections 5.3.1 and 5.3.2 of the summary report):

38. Italy has put forward before the Court a whole series of arguments against that financial correction. First, it maintains that the correction is not based on any specific evidence but only on a general impression on the part of the Commission that the Italian control system is inadequate. It is sufficiently clear from the passages of the summary report set out above that the Commission did in fact base itself on significant results yielded by the checks which it carried out.

39. Next, Italy claims that it convincingly refuted the Commission's findings during the procedure for the clearance of the EAGGF accounts. As a result, the Commission decided to refuse to charge expenditure to the EAGGF only in respect of 1988, and then only to the extent of 5%. However, Italy considers that the Commission should have refrained from making any correction at all. I am unable to accept that reasoning. It seems in fact to have been the case that, after giving Italy an opportunity to put across its complaints, the Commission effected a correction lower than it had originally intended to make. But it does not follow ipso facto that the lower correction was wrongly or insufficiently reasoned. In my view, the summary report provides a coherent, acceptable explanation of the correction which was ultimately made. In order to contest that correction Italy should have contested the reasons underlying it, which it has failed to do.

40. Italy argues incidentally that, in the absence of any findings of any substantive irregularity, it cannot claim repayment of the amount of the financial correction from the parties which received the aid. This means that the correction may not be imposed on it. That argument confuses clearance of EAGGF accounts with the relationship with the recipients of the aid. Refusal to grant Community financing docs not depend on whether it is practically possible to recover the aid from the recipients. Moreover, it is the responsibility of the Member State itself not to grant unlawful aid (see section 3 above).

41. Lastly, Italy argues that the shortcomings found in the controls are due to inadequate provisions of Community law. It claims that the Commission admitted this by amending the provisions relating to controls in 1989. The Commission contests this argument by referring, rightly, to the judgment in Case C-8/88 Germany v Commission. In that judgment the Court held as follows:

Sixth point in dispute: LIT 67501305800 in respect of aid for the production of durum wheat

42. This, the final point in dispute, relates to the grant of aid for the production of durum wheat. According to section 5.4 of the summary report, during the clearance of accounts for 1985, doubts arose about the consistency between the areas actually cultivated in Italy and the areas in respect of which aid was granted. Consequently, in 1987 the Commission asked the Italian authorities to carry out an administrative inquiry pursuant to Article 6 of Regulation No 283/72. A sample of 3500 applications was checked. According to the Italian authorities, the inquiry disclosed irregularities of 8%. The Commission took the view that that percentage did not tally with the data at its disposal, and carried out its own statistical analysis of the findings made by the Italian authorities, arriving at a percentage of irregularities of (at least) 12%. In the summary report, the Commission goes on to mention the shortcomings which it found in the procedures used to check applications for aid: lack of written guidelines, insufficient coordination of controls, insufficient land measurement and lack of effective sanctions. On those grounds, the Commission decided that Italy had failed to fulfil its obligations and made a 12% financial correction for the 1987 and 1988 financial years.

43. The Italian Government contests that correction on the basis of three pleas. The first plea relates to the retroactive nature of the financial correction. That argument starts out from the fact that the Commission made no financial correction for years prior to 1987. It is claimed that the reasons for this emerge from a Commission memorandum dated 19 November 1990, which Italy has produced to the Court: Since Italy asked the Commission to organize an inquiry pursuant to Article 6 of Regulation No 283/72 and the relevant inquiry started in 1987, the Commission's departments consider it to be fair that the amounts declared by Italy in respect of the measure in question should be corrected as from 1987. According to Italy, that memorandum confirms the principle that no financial correction may be made retroactively in respect of the period prior to the inquiry. By the same token, it argues that the Commission was not entitled to effect a correction for 1987 and 1988 cither, since the administrative formalities for those years had already been carried out at the time when the Commission notified the results of its inquiry to Italy. This reasoning seems to me to be wrong.

44. As I have already mentioned in my preliminary observations, EAGGF financing of expenditure incurred by national authorities is governed by the strict, objective rule that only expenditure undertaken according to Community rules may be charged to the Community budget.

45. The second plea (or series of pleas) raised by Italy relates to the statistic method employed by the Commission in arriving at the refusal to charge 12% of the expenditure to the EAGGF. In the first place, Italy reiterates its general complaints about the use of extrapolation. As I have already stated (section 17), Italy bases itself in this connection on an incorrect interpretation of the basic rules on the financing of the common agricultural policy.

46. Next, Italy complains that, at the time when it requested the opening of an administrative inquiry, the Commission did not inform it that the results of the inquiry might have financial implications. A priori, an inquiry could be carried out either for purely statistical purposes or for control purposes. Had Italy known in this case that the inquiry was to be carried out for control purposes, it would have insisted on the sample's having been more representative and, more generally, on better safeguards to ensure the reliability of statistical inferences drawn from the data obtained in the inquiry. It maintains that in that respect the Commission failed to fulfil its obligation to cooperate in good faith with the Member State.

47. Specifically as regards the present proceedings, Italy's arguments are not sufficiently substantiated by the facts. The administrative inquiry in question was requested by the Commission in a letter dated 12 June 1987, which Italy has produced to the Court. The first paragraph of that letter clearly shows that the Commission is assuming from the outset that it will uncover irregularities:

48. A further complaint made by Italy relates to the different percentages of irregularities at which it and the Commission arrived. On the basis of their examination of 3500 applications, the Italian authorities came to a figure of 18% of irregularities. Using the same figures, the Commission arrived at a percentage of (at least) 12% by means of statistical analysis. Italy alleges that the Commission has not provided sufficient proof that its percentage is the correct one.

49. Lastly, Italy's third plea relates to shortcomings in the provisions of Community law relating to controls, as witnessed by the subsequent adoption of new provisions relating thereto. Italy's arguments in this context are identical to those put forward with regard to the provisions on supervising the aid for the processing of soya beans (see section 42 above) and must be rejected for the same reasons.

Conclusion

50. In view of the foregoing, I propose that the Court should dismiss the application in its entirety and order the applicant to pay the costs.

1 Original language: Dutch.

2 OJ 1990 L 350, p. 82.

3 OJ, English Special Edition 1970(1), p. 218. See also Regulation (EEC) No 283/72, cited in footnote 8 below. These general rules have been supplemented by specific rules for the various agricultural sectors.

4 Article 2(1) and Article 3(1) relate more specifically to refunds on exports to third countries and intervention to stabilize the agricultural markets, respectively. Article 1(3) is concerned with financing by the Guidance Section of the EAGGF.

5 Regulation (EEC) No 1723/72 of the Commission of 26 July 1972 on making up accounts for the European Agricultural Guidance and Guarantee Fund, Guarantee Section (OJ. English Special Edition, Second Scries, III- European Agri cultural Guidance and Guarantee I-'und, p. 109).

6 Case 326/95 Netherlands v Commission [1987] ECR 5091, paragraph 7. It also follows from the objective, strict nature of the clearance of EAGGF accounts that there is no room for the application of a de minimis rule (Case C-335/87 Greece v Commission [1990] ECR I-2875) and that the Commission has no discretionary power to derogate from the rules regulating the allocation of expenses (Joined Cases 15/76 and 16/76 France v Commission [1979] ECR 321, paragraph 28).

7 Case 11/76 Netherlands v Commission [1979] ECR 245, paragraph 25. This exception is connected with the second paragraph of Article 215 of the EEC Treaty and Article 8(2) of Regulation No 729/70.

8 Sec also Article 5(1), Article 4(1) and the second subparagraph of Article 8(2) of Regulation No 729/70.

9 The Commission is also entitled to require a Member State to set up an administrative inquiry in which members of the Commission's staff may take part under Article 6 of Regulation (EEC) No 283/72 of the Council of 7 February 1972 concerning irregularities and the recovery of sums wrongly paid in connection with the financing of the common agricultural policy and the organization of an infor mation system in this field (OJ. English Special Edition 1972(1), p. 90).

10 Case C 281/89 Italy v Commission (1991] ECR I 347, paragraph 19

11 The duty imposed on the Member States by Article 5 of the EEC Treaty and Article 9(1) of Regulation No 729/70 to provide the Commission with all the data necessary for control purposes is also relevant in this connection; sec sec lion 7 above.

12 Opinion in Case C-281/89 Italy v Commission [1991] ECR I-354, section 18.

13 Case C-281/89 Italy v Commission [1991] ECR I-347, paragraph 20.

14 Case 347/85 United Kingdom v Commission [1988] ECR 1749, paragraph 60.

15 The additional levy was introduced by Council Regulation (EEC) No 856/84 of 31 March 1984 amending Regulation (EEC) No 804/68 on the common organization of the market in milk and milk products (OJ 1984 L 90, p. 10). Article 5c(5) of Regulation No 806/68, as amended by Regulation No 856/84, provides that the additional levies shall be regarded as intervention measures designed to regulate agri cultural markets .... Accordingly, they come within the financing rules laid down by Regulation No 729/70, which I discussed earlier; see footnote 3 above.

16 The third paragraph of subsection (a) of section 4.3.10.3 of the summary report on the results of the checks carried out for the purposes of the clearance of the accounts of the Guarantee Section of the EAGGF for 1988 (Commission document VI/220/90; definitive version, including all addenda and amendments, of 23 November 1990); hereinaf ter the summary report.

17 This is clear from Article 5(1) of Regulation No 804/68, cited in footnote 14, and from the second recital in the pre amble to amending Regulation No 856/84. I can find no indication in the written or oral procedure in this case that Italy might contest this point.

18 Commission Regulation (EEC) No 1546/88 of 3 June 1988 laying down detailed rules for the application of the additional levy referred to in Article 5c of Regulation (EEC) No 804/68 (OJ 1988 L 139, p. 12).

19 Article 16(1) in fine of Regulation No 1546/88: This statement shall also cover sales of milk products produced on the farm to wholesalers, cheese curers or retailers.

20 The premiums are granted pursuant to Council Regulation (EEC) No 1837/80 of 27 June 1980 on the common orga nization of the market in sheepmeat and goatmeat (OJ 1980 L 183. p. 1).

21 The manner and methodology of the audit are described in section 3.3.6.2.3 of the summary report.

22 This emerges both from Italy's arguments in the written procedure and at the hearing and from documents pro duced by the Commission, in particular a letter dated 22 September 1990 from the Italian intervention agency AIMA to the Commission.

23 This is true in particular of the method of ascertaining the age of the animals from their weight, which Italy contests. It appears from the documents appended to the Commission's defence that that method is prudent and reasonable and was sufficiently reasoned vis-à-vis the Italian authorities.

24 The Commission has observed, and the summary report confirms, that it did in fact also make specific findings relating to a number of actual irregularities. However, this is not a renuircment in order for the Commission to reach the conclusion that there arc insufficient controls.

25 Cf. the judgment in Case 214/86 Greece v Commission [1989] ECR 367 (summary publication only). In that case, the Member State argued that the Commission was not entitled to base a financial correction on an analysis of samples taken at the time when cereals were sold after two years in store, but should have examined the quality of the cereals at the rime when they were taken into intervention. In paragraph 17 of the judgment, the Court held in response to that argument that it was for the Member States to satisfy themselves that transactions financed by the EAGGF were actually carried out and executed correctly. It was not the duty of the Commission to check the regularity of each intervention measure.

26 The 11th paragraph of that letter reads as follows: It is clear that the card system used in other sectors will enable the aid granted under the measure concerned to be supervised fully and effectively.

27 See also as regards the use of extrapolation my Opinion in Case C 8/88 Germany v Commission [1990] ECR I 2334, sections 29 and 30, and the Opinion of Advocate General Gulmann of 17 March 1992 in Case C 385/89 Greece v Commission, [1992] ECR I-3225, sections 54 and 55.

28 Article 5 of Regulation (EEC) No 1467/70 of the Council of 20 July 1970 fixing certain general rules governing inter vention on the market in raw tobacco (OJ, English Special Edition 1970(11), p. 497) provides that nly tobacco corresponding to the minimum quality characteristics to be defined on the basis of classification by variety and quality shall be bought in by the intervention agencies. Those characteristics arc defined in Article 6(2) and Annex III of Regulation (EEC) No 1727/70 of the Commission of 25 August 1970 on intervention procedure for raw tobacco (OJ, English Special Edition 1970(11), p. 592).

29 Case C-366/88 France v Commission [1990] ECR I-3571.

30 See section 2 et seq., in particular section 6.

31 Case C-385/89 Greece v Commission [1992] ECR I-3225.

32 Paragraphs 20 and 21 of the judgment.

33 Or in the judgment in Case C 385/89 Greece v Commission, cited in footnote 30, because the question could be avoided at the procedural level.

34 Case 214/86 Greece v Commission [1989] ECR 367 (summary publication only).

35 See footnote 2.

36 In paragraph 18 the Court refers to the fact that the annulled measure could impose financial burdens on the private persons concerned.

37 In section 33 of his Opinion in Case C 366/88 Hance v Commission [1990] HCR I 3593, Advocate General Tesauro suggested that the operative part of the judgment should be based solely on Article 9(3) of Regulation \'o 729/7C

38 This docs not mean that analyses carried out by the Com mission in the context of the clearance of EAGGF accounts vis à-vis the Member States can have no implications for the relationship with recipients of aid. It appears from the factual background to the judgment in Pftrnzzi und Longo that the Italian authorities used the findings made in the analyses carried out by the Commission in their relation ship with the private parties involved.

39 Case C-240/90 Germany v Commission [1992] ECR I-5383, paragraph 19.

40 Section 4.9.2.1.5 reads as follows: ... It is accepted that leaves which are substantially less than whole and more than a third of whose surface is damaged should not be taken into account in calculating the correction because those defects could have occurred when the sample was being taken or during transport. The financial correction was adjusted accordingly.

41 Article 5(2) of Regulation No 729/70 provides that the Commission, after consulting the Committee for the Euro pean Agricultural Guidance and Guarantee Fund, is to make up the accounts in accordance with the procedure laid down in Article 13 of that regulation.

42 Section 5.1 of the summary report.

43 According to Article 2(5) of Commission Regulation (EEC) No 3472/85 of 10 December 1985 on the buying-in and storage of olive oil by intervention agencies (OJ 1985 L 333. p. 5), intervention agencies arc to check the quality of the olive oil offered for intervention against the quality charac tcristics set out in Article 35 of and the annex to Regulation No 136/66/EEC of the Council of 22 September 1966 on the establishment of a common organization of the market in oils and fats (Ol, English Special Edition 1965 1966, p. 221), as specified by Commission Regulation (EEC) No 1058/77 of 18 May 1977 on the characteristics of olive oil and of certain products containing olive oil and amending the Common Customs Tariff nomenclature as regards olive oil (OJ 1977 I. 128, p. 6).

44 That inquiry seems moreover to constitute a praiseworthy example of collaboration between national authorities and the Commission.

45 By letter of 2 November 1989, which the Commission has produced to the Court. Moreover, Italy confirmed its acceptance both during the written procedure and at the hearing.

46 Judgment of 10 October 1991 in Joined Cases C-161/90 and C-162/90 Petruzzi and Longo [1991] ECR I-4845. This to the judgment to which I referred above (section 23).

47 In the absence of proof that the plea is based on information which was not known until during the written procedure, that plea is also inadmissible under the first subparagraph of Article 42(2) of the Rules of Procedure.

48 Telex messages from the Commission to the Italian author ities dated 13 June 1986, 10 October 1986 and 5 August 1988.

49 Only one indication is on the file and it is contained in a document lodged, not by Italy, but by the Commission. This is a letter dated 2 November 1989 from the Italian authorities to the Commission, the fourteen paragraph of which reads as follows: The recapitulative tabic shows that all the lots were sold at prices corresponding to the declared quality of lampante virgin olive oil, which rules out any etcrioration in quality due to bad storage or the presence of olive residue oil. Apparently, the table in question was appended to the letter, but it is not in the file lodged with the Court. In any event, it is for Italy to substantiate us complaints by adducing evidence.

50 Sec the telex message of 5 August 1988 from the Commis sion to the Italian Ministry of Agriculture appended to the Commission's rejoinder.

51 The system is based on Council Regulation (ITC) No 1491/85 of 23 May 1985 laying down special measures in respect ot soya beans (OJ 1985 L 151. p. 15).

52 Council Regulation (EEC) No 2194/85 of 25 July 1985 adopting general rules concerning special measures for soya beans (OJ 1985 L 204, p. 1).

53 Commission Regulation (EEC) No 2329/85 of 12 August 1985 laying down detailed rules for the application of the special measures for soya beans (OJ 1985 L 218, p. 16).

54 Commission Regulation (EEC) No 2537/89 of 8 August 1989 laying down detailed rules for the application of the special measures for soya beans (OJ 1989 L 245, p. 8).

55 Case C-8/88 Germany v Commission [1990] ECR I-2321, paragraph 20.

56 The aid was introduced by Article 10 of Regulation (EEC) No 2727/75 of the Council of 29 October 1975 on the common organization of the market in cereals (OJ 1975 L 281, p. 1).

57 Cited in footnote 8.

58 A similar form of words, albeit fairness is not mentioned, also appears in section 5.4.3 of the summary report.

59 Articles 2 and 3 of Regulation No 729/70. considered above.

60 Opinion in Case 347/85 United Kingdom v Commission [1988] ECR 1768, section 76.

61 In itself, this docs not raise any problem of legitimate expectations or legal certainty, since the Member States assume the fundamental responsibility at management level and arc involved throughout the procedure for the clear ance of EAGGF accounts; sec my Opinions in Case 267/87 Netherlands v Commission [1989] ECR 225. section 12, and in Case C-8/88 Germany v Commission [1990] ECR I-2334, sections 21 and 22.

62 Case 349/85 Denmark v Commission [1988] ECR 169, paragraph 19. See also the judgment in Joined Cases 15/76 and 16/76 France v Commission, cited in footnote 5, where it is stated that the Commission has no discretionary power to derogate from the rules regulating the allocation of expenses. I am therefore unable to agree with the view which has on occasions been expressed by the Commission in this case to the effect that, by not effecting a financial correction, it granted a favour in respect of the financial years prior to 1987. The Commission is not entitled to grant favours at the expense of the Communities' budget.

63 In contrast, the Commission docs have a margin of discre tion in evaluating the amount of the financial correction (Case C 281/89 Italy v Commission [1991] ECR I 347, paragraph 24).

64 In its reply, Italy refers more specifically to an internal Commission document (No VI/325/83) on the use of extrapolation. The Commission has correctly pointed out in its defence that the document does not cover situations in which defects have been found in the control machinery of a Member State.

65 Sec my Opinion in Case C-8/88 Germany v Commission, cited in footnote 26, section 21, and the judgment in that case, paragraph 20.

66 Moreover, the clearance of EAGGF accounts cannot be regarded as a penal operation. It is an objective procedure conducted in a more general context of joint management. See, inter alia, the Opinion of Advocate General Mischo in Case 347/85 United Kingdom v Commission, cited in footnote 59, section 77, and the judgment in that case, at paragraph 57.

67 Sec section 7 above and also footnote 62.

68 Italy refers in this connection to Commission Regulation No 1738/89 of 19 June 1989 laying down detailed rules on production aid for durum wheat (OJ 1989 L 171, p. 31), as subsequently amended.